China shows its other, angry face

By Peter Hartcher

11 August 2009 — 12:03am

China has taken off the mask of friendship. In the past few months, its central government has decided to show Australia another face of China. It's a harsher vision of a possible future with the rising superpower of our region.

If there were any lingering doubt that we had entered a new phase, it was dispelled by the feverish claims published on the website of China's National Administration for the Protection of State Secrets.

illustration Simon Letch.

In alleging Rio Tinto was involved in a six-year spying operation against China's steelworks, it accused the resources company of "winning over and buying off, prising out intelligence .. and gaining things by deceit''.

Six years, by the way, is the time in which iron ore prices have been rising. The previous two decades, when prices were falling, was just the free market, apparently. Only a conspiracy could cause prices to rise.

The most outlandish part of the story was the assertion that Rio's activities led China to pay $123 billion more for iron ore than it would have otherwise, a sum far larger than the total value of Rio sales to China in those years. "That means China gave the employer of those economic spies more than $123 billion for free, which is about 10 per cent of Australia's GDP," the piece argued.

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When this was reported widely in the international media yesterday, the article, a long diatribe in Mandarin, was removed from the website. The reason is obvious. This material has nothing to do with criminal jurisprudence. It is a venomous, nationalistic rant.

It exposes the motivation, or at the very least the prejudices, of the National Administration for the Protection of State Secrets, the authority conducting the prosecution of Stern Hu and his three Rio colleagues who have now been held in China for four weeks without charge. This is now, undeniably, a political case.

We already know what it's like to live in the new China growth zone. That was all the exuberant news about resource prices. Now Beijing is instructing us in what it might feel like to live in the China political zone as well.

Together with the other evidence - Beijing's hamfisted efforts to ban a film about its Uighur minority at the Melbourne Film Festival, its angry campaign to block a visit to Australia by the exiled Uighur leader Rebiya Kadeer, its chilliness in rebuffing the Rudd Government over the Stern Hu case - this is a clear sign that the Chinese regime has consciously decided to take a tougher line with Australia.

Why? First, Australia displeased Beijing. The principal reason for Chinese interest in Australia is its resources. When the big state-owned firm Chinalco wanted to increase its share in the world-class minerals assets of Rio in a $25 billion deal, Beijing was unhappy at the political wariness with which it was greeted in Canberra.

It would have been the biggest overseas acquisition that communist China had ever made.

The Australian Government did not block the deal. Indeed, it said repeatedly Chinese investment was welcome. But Canberra did put conditions on smaller takeovers of other resource assets by Chinese state-owned companies. This entrenched a principle, and it boded ill for the Chinalco deal.

The Opposition's Peter Costello was outspoken in expressing reservations about the Chinalco bid. Rio, reading the political climate, abandoned the deal.

China's leaders seem to have decided to make this rebuff an opportunity to teach a lesson to Rio, to Australia, and anyone else watching. This is the second dimension to China's angry new attitude.

It's an old Chinese folk saying - "kill the chicken to scare the monkey." In other words, you punish the weaker enemy to frighten the stronger. With a new president in the White House and a heightened mood of protectionism in the US Congress, is Beijing using Australia as the chicken to scare the American monkey?

A China specialist at Canterbury University in New Zealand, Anne-Marie Brady, says: "I think there is clearly a new approach to dealing with Australia - it could be sending a message to the US or to other countries in general."

The US has noticed. The State Department official responsible for Asia policy, Kurt Campbell, told the Herald recently: "I know China is more complicated now in Australian politics. In many respects, Australia is mimicking the US in that the image of China stirs great hopes and some anxieties. And that's exactly the way it is in the US."

This is new. Until now it had all been about the hopes, with few anxieties. Brady explains that, after 1989, China put the US in a category of one. With most of the rest of the world, Beijing followed the principle of "looking for things in common and letting disputed points lie". This was precisely its formula for Australia and the Howard government reciprocated.

But with America, Beijing took a harder line according to the principle of "looking for commonalities and facing up to differences". What has changed this year is that Beijing has moved Australia into the same category. "I think that's what China is doing to Australia now," Brady says.

This is a powerful wake-up call for Australia. The China we must live with is not the China we thought we were dealing with.